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How Does Bad Credit Affect My Car Loan?

Bad credit affects your auto loan in many ways, including making it harder to get approved and playing a role in the terms you receive. Although your credit plays an important role, a low credit score does not mean you are automatically disqualified from financing. Approval for a car loan also depends on a few other factors, such as the type of bad credit you have and the lender you apply to.

Types of bad credit

There are two different types of bad credit, and one is viewed more favorably by lenders than the other. Which one you have could be a factor in whether you get approved or not:

  1. Situational Bad Credit – Situational bad credit occurs when your credit is negatively affected due to a sudden, unforeseen change, such as a job loss or health issues that overwhelm you with medical bills. Most subprime lenders sympathize with consumers facing situational bad credit if they had good credit before the event. It is possible to get better loan terms with this type of bad credit, as long as you work with a lender that specializes in car financing for bad credit.
  2. Usual bad credit – Usual bad credit is when your credit is weak due to frequent late payments and collection accounts. Consumers with habitual bad credit are also more likely to experience charges and repossessions. Lenders are cautious about approving borrowers with this type of credit because there is a constant pattern of negative actions. However, working with the right lender could allow some of these consumers to get the second chance loan they need.

Prove you can handle a car loan

As we mentioned earlier, your credit isn’t the only thing subprime lenders look at. These lenders want to make sure you’re able and willing to make your loan payments — regardless of your credit status — and ask you to provide proof of these four things:

  1. Income – A recent computer-generated payslip showing the cumulative income since the beginning of the year. Subprime lenders typically have a minimum monthly income requirement of $1,500 to $2,000 before taxes for a single job.
  2. Residence – A recent utility bill in your name showing the address given on the application.
  3. Work phone – A recent telephone bill in your name; it can be a landline phone or a contract mobile phone, but not a prepaid phone.
  4. Identity – A valid driver’s license or ID

Need help finding a reseller?

Bad credit can affect your car loan, but that doesn’t have to stop you from getting one.

Find a lender who takes care of bad credit car financing isn’t easy, and it can be stressful going from dealership to dealership and getting turned down. Fortunately, Auto Express Credit is here to help. We specialize in connecting consumers with local special financing dealers who have lenders to finance people with bad credit.

Our service is free and without obligation. All you have to do is fill out our quick and easy form car loan application form, and we’ll get to work right away to connect you with a reseller.